According to a United Nation body, supply lines will be redirected, high borrowing costs will burden economies, and new regulations limiting cross-border trade will surface in 2023, accounting for almost 5% of the global trade deficit from the previous year’s record.
The United Nations Conference on Trade and Development, headquartered in Geneva, projects that the value of trade in goods and services will stand at $30.7 trillion in 2022 as opposed to $32.2 trillion in 2022.
The primary cause, according to Bloomberg News, is a $2 trillion, or 8%, decline in merchandise trade.
According to a UNCTAD estimate released on Monday, trade in services will rise by $500 billion, or around 7%, this year compared to last.Lower costs for goods affected by high inflation a year ago are also a reason for the decline.
“Even though the value of traded goods decreased in 2023, the slightly positive trend in the volume of international trade suggests a resilient global demand for imported products,” the report said.
UNCTAD noted how countries aligned geopolitically are trading more with each other while those in disagreement are trading less bilaterally.
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That divergence among several issues clouding the outlook for next year, the agency said.
“The forecast for global trade remains highly uncertain and generally pessimistic,” the report said. “While certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns.”
Geopolitical factors: Geopolitical factors, persisting inflation, and concerns about global debt sustainability will weigh on international trade flows, according to Unctad.
“Geopolitical tensions, including the Russian Federation’s conflict with Ukraine, remain the biggest risks negatively affecting international trade during 2023.”
Interest rates are also expected to remain relatively high in many economies as central banks attempt to tackle persistent inflationary pressures.
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Commodity prices are expected to remain above pre-pandemic averages, especially for energy, food, and metals, Unctad said.
“The current record levels of global debt, coupled with high-interest rates, will continue to negatively affect the macroeconomic conditions of many countries.”
On the other hand, positive factors such as an improved economic outlook for major economies, decreasing shipping costs, a weakening of the US dollar, and rising demand for services will help bolster global trade.
“Overall, although the outlook for global trade remains uncertain, the positive factors are expected to compensate for the negative trends,” Unctad said.
The UN body expects international trade patterns in 2023 to be affected by “near-shoring”, or relocating production processes closer to target markets, and “reshoring”, bringing manufacturing back to home countries, as companies focus on improving supply chain resilience.
